Professor Marco Di Maggio: Crypto, DeFi, and Monetary Policy (EP.179)

Of all of the possible disruptive uses of cryptocurrency and blockchain, decentralised finance (or DeFi) might be the one most likely to bring this technology to a wider audience; and challenge the established finance industry in the process. For this week’s episode on crypto-based decentralised finance, we welcome economist and faculty member in the Finance Unit at Harvard Business School, Professor Marco Di Maggio. Tuning in, you’ll learn everything you need to know about DeFi and cryptocurrency, from the most basic definitions to the potential macroeconomic and geopolitical implications of a decentralised reserve currency and the effects of decentralisation on monetary policy transmission. Tuning in, you’ll learn the definitions for DAOs, DEX, NFTs and more, and Marco elaborates on some of the reasons that decentralisation is seen as an improvement over central systems as well as some of the issues that it represents. Make sure not to miss this enlightening conversation with Professor Marco Di Maggio as he shares his powerful contrasting perspectives on this inherently libertarian technology.

Key Points From This Episode:

Marco defines cryptocurrency; simply put, it’s digital currency. [0:02:59]
Find out what a DAO is; a community-led entity with no central authority. [0:03:58]
How a DAO is different from a corporation in the way it values decentralisation. [0:05:56]
Stablecoins as cryptocurrency pegged to fiat currency and backed by collateral. [0:07:07]
Learn about decentralised exchanges or DEX, the bonding curve, and Uniswap. [0:09:28]
Why decentralisation is seen as an improvement over centralisation; greater transparency and access requiring no counterparty. [0:12:32]
When decentralisation is not a good solution given the lack of accountability. [0:14:40]
Marco expands on some other issues with the technology, including its environmental impact, volatility, and regulatory uncertainty. [0:16:07]
Understanding counterparty risk, returns, and interest rates in the DeFi space. [0:18:39]
Why Marco considers blockchain and crypto DeFi a technological revolution. [0:21:41]
How someone who owns a total stock market index fund, for example, can benefit from the potential economic gains of this revolution. [0:23:45]
Bitcoin versus Ethereum and how Ethereum is used to develop DeFi apps. [0:26:06]
Whether Marco predicts a winner-take-all outcome for blockchain technology. [0:28:23]
Why rubber stamp regulation and clarity are important for the success of DeFi. [0:29:37]
How to approach investing in the DeFi space, looking at risk, exposure, and value. [0:31:30]
Marco explains why the Chinese central bank has launched the digital yuan and how the US is lagging behind this innovation [0:34:21]
Find out how DeFi ‘super apps’ provide better solutions than online banks. [0:38:33]
Distinguishing crypto from fiat currency and the macroeconomic and geopolitical implications of a decentralised reserve currency. [0:40:17]
Marco on the potential effect of crypto-based DeFi on monetary policy transmission. [0:42:44]
What NFTs are, why they sell for such high prices, and how they can be useful. [0:46:22]
How Marco defines success: through the lens of others in his life. [0:49:30]